Pursuant to Section 3, no person shall engage in any manufacturing activity unless he is issued a licence in respect of such manufacturing activity, and failure to comply with the provision is guilty of an offence and is liable on conviction to a fine not exceeding two thousand ringgit or to a term of imprisonment not exceeding six months and to a further fine not exceeding one thousand ringgit for every day during which such default continues.
However, pursuant to Industrial Co-ordination (Exemption) (Amendment) Order 1986, the Minister responsible for the Act has exempted any manufacturer with shareholder’s fund of less than RM2.5 million and with manpower less than 75 people from the application of the licence.
Applications for manufacturing licences are to be submitted to the Malaysian Investment Development Authority (MIDA), an agency under Ministry Of International Trade and Industry (MITI) in charge of the promotion and coordination of industrial development in Malaysia.
Guidelines from MIDA on the definition of “Shareholders’ funds”and “Full-time paid employees” are as follows:
- “Shareholders’ funds” are the aggregate amount of a company’s paid-up capital, reserves, balance of share premium account and balance of profit and loss appropriation account;
- “Full-time paid employees” refers to all the persons normally working in the establishment for at least six hours a day and at least 20 days a month for 12 months during the year and who receive a salary.
“Manufacturing activity” is defined under Section 2 of the Act as the making, altering, blending, ornamenting, finishing or otherwise treating or adapting any article or substance with a view to its use, sale, transport, delivery or disposal and includes the assembly of parts and ship repairing but shall not include any activity normally associated with retail or wholesale trade.
Pursuant to Section 4 of the Act, one application may be made for one or more products manufactured in one or more places of manufacturing activity but a separate licence shall be issued for each place of manufacturing activity. However, the issue of a licence would depend on whether it is consistent with national economic and social objectives and would promote the orderly development of manufacturing activities in Malaysia. The criteria as published in MIDA’s website for the approval of a project is as follows:
- Project’s Capital Investment Per Employee (CIPE) is at least RM140,000.00;
- Total full-time workforce of the company comprises of at least 80% Malaysians. Employment of foreign workers including outsourced workers is subject to current policies;
- At least 25% of the company’s full time workforce are managerial, technical, and supervisory (MTS) staff with degree and/or diploma/certificate or product’s value added is at least 40%; and
- The project must be consistent with the national economic and social objectives and promotes an orderly development of manufacturing activities in Malaysia
It is a requirement that the project shall obtain approval from State Authority and Department of Environment before the licence is issued by Ministry Of International Trade and Industry (MITI).
In the enforcement of the law, pursuant to Section 9 and 10 of the Act, a manufacturer shall furnish information pertaining to its manufacturing activity upon receipt of written request from a licensing officer. Failure to furnish the information and within the time required may lead to a fine not exceeding one thousand ringgit or to imprisonment for a term not exceeding three months or to both and is also liable to a further fine not exceeding five hundred ringgit for every day during which such default continues; or furnishes any return or other information that is false or misleading in any material respect is guilty of an offence and is liable to a fine not exceeding two thousand ringgit or to imprisonment for a term not exceeding six months or to both.
Manufacturing companies that are not yet licenced under the Act is advised to check whether it has reached the threshold for application of the licence. Please contact our Consultancy Division should you require assistance.